Morgan Stanley says Brent crude may reach $150

http://www.bloomberg.com/apps/news?pid=20601081&sid=a5Tz4LdAYOiE&refer=australia

Oil Rises After Morgan Stanley Says Brent Oil May Reach $150

By Mark Shenk

May 28 (Bloomberg) — Crude oil rose more than $2 a barrel after Morgan Stanley said that Brent oil from the North Sea could “easily” reach $150 a barrel.

Prices are rising because “supply constraints are biting against the backdrop of still-strong global demand,” Richard Berner, co-head of global economics at Morgan Stanley, said in a report today. Oil rose last week after Societe Generale SA and Credit Suisse increased their price outlooks.

“When these price forecasts come out, traders don’t want to be short, so they are in a way self-fulfilling prophecies,” said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. Shorts are bets that prices will fall.

Crude oil for July delivery rose $2.18, or 1.7 percent, to settle at $131.03 a barrel at 2:51 p.m. on the New York Mercantile Exchange. Oil climbed as high as $131.58 and fell as low as $125.96 today. Futures reached $135.09 on May 22, the highest since trading began in 1983.

“Prices are swinging wildly back and forth, which indicates that the market needs to find equilibrium,” said Kyle Cooper, director of research at IAF Advisors in Houston.

Brent crude oil for July settlement rose $2.62, or 2 percent, to settle at $130.93 a barrel on London’s ICE Futures Europe exchange. The contract touched a record $135.14 on May 22.

Oil advanced above $127 for the first time on May 16 when Goldman Sachs Group Inc. boosted its estimate for the second-half of the year to $141 a barrel, from $107, citing supply constraints. Goldman analyst Arjun N. Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.”

$150 Brent

“While prices are high enough to curb demand in the developed economies, we think that supply limits could easily take Brent crude quotes to $150 a barrel,” Berner, who is based in New York, said in the report. Morgan Stanley is the second- biggest U.S. securities company.

The Movement for the Emancipation of the Niger Delta, Nigeria’s main militant group, threatened attacks and car bombings tomorrow in the Niger Delta to mark the first anniversary of President Umaru Yar’Adua’s inauguration.

MEND, which has shut down about 20 percent of Nigeria’s oil production since February 2006, has increased its assaults on the country’s oil infrastructure since April. Nigeria was the fourth- biggest source of U.S. oil imports during the first three months of this year, according to the Energy Department.

Dow Chemical Co., the largest U.S. chemical maker, will raise prices on all of its products as much as 20 percent because of surging costs for energy, raw materials and transportation.

The increases are needed after a 42 percent jump in first- quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today in a statement. The increases take effect on June 1, Midland, Michigan-based Dow said.

Dow is trying to pass on higher costs amid company forecasts that spending on energy and hydrocarbon-based ingredients will climb to $32 billion this year, a fourfold increase from 2002.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: May 28, 2008 16:30 EDT

Dow Raising Prices Most Ever as Energy Costs Surge

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aA0k2riqqPDg

By Dale Crofts

May 28 (Bloomberg) — Dow Chemical Co., the largest U.S. chemical maker, will raise prices the most in the company’s 111- year history because of surging costs for energy and raw materials used to make Styrofoam, pesticides and plastics.

The “unparalleled” increases of as much as 20 percent on all of Dow’s 3,200 products are needed after a 42 percent jump in first-quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today. The increases take effect June 1, the company said in a statement.

Dow plans to pass on some of an expected $7.4 billion increase in energy and materials costs this year that Liveris said is due partly to the U.S. government’s failure to develop policies to solve a “true energy crisis.” Higher food, fuel and metals prices are contributing to inflation and helped boost U.S. consumer prices 3.9 percent in the year ended in April.

“This is our largest across-the-board increase,” Liveris said today in an interview at the company’s headquarters in Midland, Michigan. “We have a tsunami landing on us here,” he said, adding that Dow has been boosting prices for four years.

Dow gained 60 cents, or 1.5 percent, to $40.83 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares have fallen 9.7 percent in the past year.

Rising natural gas and crude oil prices are increasing costs for naphtha and other energy-derived chemical ingredients that account for half of Dow’s total expenses. First-quarter profit fell 3.3 percent to $941 million because of higher costs.

`Leading the Charge’

“Dow is probably leading the charge here in being this aggressive, and others are probably going to follow suit,” Tom Uutala, who helps manage $60 billion, including Dow shares, at Victory Capital Management, said in a phone interview from Cleveland.

Rohm & Haas Co., the world’s biggest producer of acrylic- paint ingredients, implemented surcharges on all products on May 1 that will reflect changes in raw-material prices, Chief Operating Officer Pierre Brondeau said in an interview today.

Lanxess AG, Germany’s biggest publicly traded specialty- chemicals maker, said today it is confident it will be able to pass on its higher costs.

Liveris is seeking acquisitions and joint ventures that will give the company access to lower-cost materials.

Kuwait-based Petrochemical Industries Co. agreed to buy 50 percent of Dow’s commodity-plastics unit for $9.5 billion in December in a transaction Liveris said would provide the world’s largest plastics business with cheaper raw materials.

Energy Policy

Liveris said today the U.S. government’s failure to develop a comprehensive energy policy is causing the nation’s chemical industry to lose ground to global competitors.

“The country now faces a true energy crisis, one that is causing serious harm to America’s manufacturing sector and all consumers of energy,” Liveris said in the statement.

Crude oil traded in New York has doubled in the past year and reached a record $135.09 a barrel on May 22. Natural gas climbed 59 percent this year.

To contact the reporter on this story: Dale Crofts in Chicago at dcrofts@bloomberg.net.

Last Updated: May 28, 2008 17:03 EDT

Gordon Brown sez increasing demand dwindling supply is “long term”

http://ukpress.google.com/article/ALeqM5jP69lpdNASfd9FLFbkQd8kruX6SQ

Brown: High oil prices here to stay

8 hours ago

Gordon Brown has warned that high oil prices are here to stay as Downing Street played down speculation over a U-turn on road and fuel taxes.

The Prime Minister said that while he wanted to help the “hardest hit” families, the problem of global demand outstripping supply was “long-term”.

“Of course in the current situation we are trying to do things that will help those families who are hardest hit,” Mr Brown said. “This is not just a national problem. It is a global problem of supply and demand, not just in the short term but the medium term and the long term.”

The comments, at a meeting with industry leaders in Scotland, came as the Government unveiled moves to boost North Sea oil production by up to 70,000 barrels a day.

Business Secretary John Hutton said it was vital Britain made maximum use of its resources to ease pressure on the economy.

However, there was still confusion over how ministers would respond to anger among the public and Labour backbenchers over the planned rises in road and fuel taxes.

In the wake of strong hints from Cabinet ministers on Tuesday, Number 10 played down suggestions there could be a U-turn over the 2p hike in fuel duty and controversial reforms to road tax.

“Of course we understand the concerns consumers face, but we also need to take into account the need to ensure economic stability, to fund public services and to promote energy efficiency,” the Prime Minister’s spokesman said.

“All that John Hutton and Jack Straw were saying yesterday was nothing more than of course the Government understands the concerns that consumers face.”

Demand in Oil in India prompting outcry for price hikes

http://www.hindu.com/2008/05/29/stories/2008052955551200.htm

No decision on hike in oil prices as ministries differ

 

Sujay Mehdudia

NEW DELHI: The Empowered Group of Ministers (EGoM) headed by Pranab Mukherjee, which met here on Wednesday to take up the Petroleum Ministry’s proposal to effect a “sharp hike” in petrol and diesel prices, could not take a decision owing to “sharp differences” between the Petroleum and Finance Ministries.

Meanwhile, the Indian Oil Corporation said it would only distribute whatever was possible in its domestic capacity and would not resort to imports, indicating curtailment in supplies to retailers.

Highly placed sources said “serious differences” over a cut in import duties on crude and a downward revision of excise duties on petrol and diesel dominated the proceedings at the EGoM meeting, which lasted for almost an hour.

While Finance Minister P. Chidambaram made it clear that he was not for any revenue loss, thus ruling out any duty or excise cut, Petroleum Minister Murli Deora painted a “grim scenario,” pleading that it was high time this matter was decided one way or the other as the present “mess” would leave oil marketing companies (OMCs) without cash to import crude.

The Finance Ministry is refusing to share the burden of the OMCs by making adjustments in duty structure, a demand made by the Left parties as well as the Bharatiya Janata Party.

The OMCs such as BPCL and HPCL have cash to buy crude only till July, while the IOC said it could finance imports only till September.

Mr. Deora met Prime Minister Manmohan Singh on Tuesday to push for a price hike of Rs. 10 a litre of petrol, Rs. 5 a litre of diesel and Rs. 50 an LPG cylinder.

Mr. Deora is now likely to meet Congress president Sonia Gandhi to apprise her of the “serious situation” in the oil sector.

gas demand down 1.7% from same time last year

http://www.reuters.com/article/marketsNews/idUSN2834760620080528

Wed May 28, 2008 4:08pm EDT

By Rebekah Kebede

 

NEW YORK, May 28 (Reuters) – Americans, notorious for their love of the open road, are cutting back on gasoline consumption as prices at the pump continue to break records.

 

During the week leading up to the Memorial Day holiday, the traditional start of vacation season, Americans pumped 5.5 percent less gasoline than a year ago as average prices hit a peak $3.84 a gallon, MasterCard Advisors said in a report.

 

“It’s in uncharted territory,” said Michael McNamara, vice president of MasterCard Advisors. “As prices have gone up, consumer behavior has changed and it looks like it’s continuing to change,” McNamara said.

 

Average retail gasoline prices have jumped above $4 per gallon in 10 states and are running about 25 percent higher than last year, according to travel and auto group AAA.

 

So far this year, Americans have pumped about 1.7 percent less gasoline than in the same period a year ago, MasterCard said in its report.

 

The findings follow last week’s U.S. Department of Energy data which showed highway miles driven in March fell 4.3 percent from a year earlier, the first March decline since the last major oil shock in 1979.

 

Other nations are also struggling to cope with the spike in energy prices. Gasoline demand in Britain dropped 7 percent below year-ago levels in April, with diesel use down almost 2 percent, according to government figures released on Wednesday.

 

Despite the decline versus last year, the MasterCard report revealed a slight bump in consumption of gasoline from week to week as vacationers topped off their tanks.

 

“That is not unusual for this type of holiday weekend,” McNamara said. “That said, we’re still below where we were last year and a lot of that is because so far this spring, we haven’t seen the seasonal increase.”

 

MasterCard Advisors estimates retail gasoline demand based on aggregate sales activity in the MasterCard payments system coupled with estimates for all other payment forms. MasterCard Advisors is a unit of MasterCard Inc (MA.N: Quote, Profile, Research). (Reporting by Rebekah Kebede; editing by Matthew Lewis)

5/28/08, NY Crude closes $131.03, low of $125.96

http://www.reuters.com/article/hotStocksNews/idUSSYD3274320080528

Wed May 28, 2008 3:20pm EDT

By Santosh Menon

 

LONDON (Reuters) – Oil rose $2 to more than $131 a barrel on Wednesday, rebounding from a sharp drop that had been triggered by concerns about a slowdown in world energy demand.

 

“The bounce was more technical, with the sell-off a bit too sharp and once again buyers have stepped in to buy the dips,” said Addison Armstrong, director of market research at Tradition Energy.

 

Encouraging buying, Nigerian militants said they planned to carry out a series of car bombings in the oil-producing Niger Delta to mark President Umaru Yar’Adua’s first year in office.

 

U.S. crude settled up $2.18 to $131.03 a barrel, off lows of $125.96 hit earlier in the session but still well-below the record of $135.09 hit last week. London Brent crude rose $2.63 to $130.93 a barrel.

 

Oil prices have doubled since last year amid growing concern over supplies that have been squeezed by rapid growth in developing Asian economies and repeated supply disruptions from major producers like Nigeria.

 

But the market has been knocked off its peak by growing evidence that consumer nations are struggling to cope with the spike — feeding expectations that world energy use could flag in the coming months.

 

Gasoline demand in Britain in April was running 7 percent below a year ago, while demand for diesel was down nearly 2 percent, according to government figures. U.S. fuel demand also has lagged amid record pump prices and an economic downturn.

 

Analysts cited concern that Asian energy demand growth could drop soon as governments in the region cut subsidies. 

“There are signs that soaring energy prices are now even starting to cause ripples in the booming Asian economies,” said Edward Meir at MF Global.

Smaller Asian oil consumers such as Taiwan, Indonesia and Sri Lanka have all raised domestic fuel prices, and India also is poised for a modest increase.

 

Soaring fuel costs have triggered a wave of protests around the world. Convoys of trucks converged on London on Tuesday, while in France fishermen blocked road and rail access to the fuel depot of the country’s largest oil refinery at Gonfreville, owned by Total (TOTF.PA: Quote, Profile, Research).

 

Oil’s rebound came despite a rally in the dollar after a report showed new orders for U.S. consumer goods for April fell less than expected.

 

The U.S. dollar has maintained a strong negative correlation with commodities markets in recent months, as a weaker dollar strengthens the purchasing power of buyers using other currencies.

 

Data from the U.S. Energy Information Administration due on Thursday is expected to show nationwide crude inventories unchanged, gasoline supplies down slightly and distillate inventories up slightly.

 

(Additional reporting by Richard Valdmanis and Robert Gibbons in New York, Luke Pachymuthu in Singapore; Editing by David Gregorio)

 

Ford plans involuntary layoffs of salaried workers

http://ap.google.com/article/ALeqM5j5Zlv4GuzTf8AKb8u4seNySqXftwD90UPTJG0

Ford plans involuntary layoffs of salaried workers

By DEE-ANN DURBIN – 1 hour ago

DETROIT (AP) — Ford Motor Co. plans to conduct involuntary layoffs of salaried employees by August as part of a restructuring in the face of slumping sales and record-high gas prices, a spokeswoman said Wednesday.

Marcey Evans said the company hasn’t yet determined how many white-collar jobs will be cut. But she said that unlike previous rounds of layoffs in recent years, employees won’t be offered voluntary buyout packages with financial or early retirement incentives. Evans said the company wants the cuts completed by Aug. 1, which is not enough time to roll out voluntary offers and wait for employees to accept them.

“Given the speed that we’re moving, we don’t expect to conduct voluntary layoffs,” she said.

The Detroit News reported Wednesday that some employees were told that Ford plans to cut its salaried work force by 10 to 12 percent, or more than 2,000. But Evans said Ford hasn’t yet decided how many people will be cut.

Ford announced last Thursday that it was cutting North American production for the rest of this year and no longer expects to return to profitability by 2009 due to the rapidly deteriorating U.S. market. The company said it would release more details about its cost-cutting efforts in July.

In a memo sent Thursday to employees, Ford President and Chief Executive Alan Mulally said the company would need to make salaried job cuts. Mulally said employees will be notified once the company has determined the extent of the cuts.

“We want to do what is right for the future of our business and also respect the fact that these actions will personally affect our team and their families,” Mulally said in the memo.

Ford had 23,700 salaried workers at the end of 2007. The automaker has cut the number of full-time salaried workers in North America by 10,800 since the end of 2005, mostly through attrition, early retirement offers and voluntary buyouts. In 2007, the company had so many people accepting offers that it was rescinding the offers from workers in some departments.

At the beginning of this year, Mulally said there would be more salaried cuts needed, but that those would likely come through attrition. Mulally said last week that the company has had to boost its restructuring efforts after sales slumped more severely than expected, especially for large pickups and sport utility vehicles.

With U.S. auto sales expected to drop to around 15 million this year, down from 17 million as recently as 2005, Ford needs to cut costs to help fund new technology and stay afloat until the market recovers, said Kevin Tynan, an auto analyst with Argus Research in New York. Ford and other automakers are investing in costly hybrid and electric vehicle technologies but won’t see the benefits for several years, he said.

Tynan said Ford wouldn’t be able to reach its layoff targets without involuntary layoffs. But he also noted the company and its U.S. competitors have weathered downturns in the past.

“If history is a guide, we’ve been through it before. You get to these points where you restructure, then you start to recover,” Tynan said. “It’s at least an industry and a group of companies that have proved they can get pretty creative when the back’s against the wall.”

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said Ford’s efforts to globally integrate engineering and design have probably led to significant redundancy.

“It’s like the general that will sacrifice a battalion to save a division,” he said. “You’ve got to get to the turnaround point where you go positive on cash.”

Ford shares fell 4 cents to $6.76 in early afternoon trading.

Auto Writer Tom Krisher in Detroit contributed to this report.

Warren Buffett on Peak Oil

Energy costs cripple stock market

http://in.reuters.com/article/usMktRpt/idINN2333785720080523?sp=true

US STOCKS-Record oil fuels markets’ worst week in 3 months

Sat May 24, 2008 1:57am IST

(Updates to close)

* Record oil fuels markets’ worst week in 3 months

* Airlines, industrials among sectors hit hardest

* Housing data shows mixed picture

By Kristina Cooke

NEW YORK, May 23 (Reuters) – Wall Street stocks fell on Friday to round out the worst week in three months as worries about high oil prices hammered energy-sensitive sectors and left investors on edge about inflation at the onset of a holiday weekend.

Economic bellwethers United Technologies (UTX.N: Quote, Profile, Research) and Caterpillar (CAT.N: Quote, Profile, Research) were among the top drags on the Dow Jones industrials.

General Motors’ (GM.N: Quote, Profile, Research) shares fell to a 26-year low after the company said strikes had reduced its earnings by a total of $2.8 billion.

Worries about the impact of high oil prices, which topped $135 a barrel a day earlier, pressured stocks throughout the week, stoking fears about inflation and weaker consumer spending.

Higher oil pushed the American Stock Exchange index of airline stocks .XAL down another 4.2 percent on Friday and a 20-percent drop on the week.

“Oil prices are what’s driving us down again. As they just continue to go higher and higher, that’s putting pressure on the economy, and as people think the economy is not going to do so well, that’s hurting stocks,” said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

The Dow Jones industrial average .DJI fell 145.99 points, or 1.16 percent, to close at 12,479.63. The Standard & Poor’s 500 Index .SPX slid 18.42 points, or 1.32 percent, to 1,375.93, while the Nasdaq Composite Index .IXIC ended down 19.91 points, or 0.81 percent, at 2,444.67.

For the week, the Dow fell 3.9 percent, the S&P 500 shed 3.5 percent and the Nasdaq dropped 3.3 percent. For all three indexes, it was their worst weekly percentage drop in three months.

Since the start of the year oil prices have climbed by more than 30 percent, sapping consumer spending on everything from driving to shopping.

Data from a realtors group showed a decline in U.S. existing home sales that was less than expected. But the report gave a mixed picture, with inventories of unsold homes rising 10.5 percent last month.

Shares of American International Group Inc (AIG.N: Quote, Profile, Research), the world’s largest insurer, fell 2.3 percent to $36.95. Moody’s Investors Service cut the company’s credit rating, citing losses from its exposure to the U.S. mortgage market and credit derivatives.

GM shares were down 4.5 percent at $17.60, while United Technologies’ shares fell 2.6 percent to $70 and Caterpillar shares slid 0.8 percent to $81.55.

Restaurant Cheesecake Factory (CAKE.O: Quote, Profile, Research) fell 6.4 percent to $19.53 and Darden Restaurants (DRI.N: Quote, Profile, Research), the operator of the Red Lobster chain, fell 4.4 percent to $31.74.

Takeover developments were a bright spot, as the Dow and the Nasdaq were on track for their worst week in three months.

Belgian brewer InBev (INTB.BR: Quote, Profile, Research) is working on a bid for U.S. rival Anheuser-Busch Companies Inc (BUD.N: Quote, Profile, Research), according to a source familiar with the situation. Shares of the brewer of Budweiser beer ended 7.7 percent higher at $56.61.

Trading volume was light on the New York Stock Exchange, with about 1.1 billion shares changing hands, below last year’s estimated daily average of roughly 1.9 billion, while on Nasdaq, about 1.69 billion shares traded, also short of last year’s daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and Nasdaq. (Editing by Gary Crosse)

 

© Thomson Reuters 2008 All rights reserved

US Energy Sec’y does not feel margin requirements will alter speculation

The theory that oil prices are increasing, because of “institutional investors” has a solution of raising margin requirements. It seems we will not find out if the cause of price increase is this speculation, because the energy secretary will not be supporting increaseses in margin requirements.

http://in.reuters.com/article/oilRpt/idINWBT00904620080523

Raising NYMEX oil margins won’t cut prices -Bodman

Fri May 23, 2008 11:25pm IST

 

Email | Print |

Share

| Single Page

[-] Text [+]

WASHINGTON, May 23 (Reuters) – Significantly raising margin requirements on oil futures trading at the New York Mercantile Exchange would not curb speculative investing and bring down crude prices, U.S. Energy Secretary Sam Bodman said on Friday.

“I don’t think that the margin requirements per se are going to have any impact on it,” Bodman said in an interview on CNBC television. (Reporting by Tom Doggett)

 

© Thomson Reuters 2008 All rights reserved